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Finding the ultimate portfolio diversifier
This article first appeared in Portfolio Adviser on 12 September 2024 Covid-19 unleashed a unique...
BlackRock World Mining Trust
Investment trust
BlackRock World Mining is a specialist trust offering exposure to mining and metals companies globally. In addition to investing in quoted securities, the trust may also invest in royalties derived from the production of metals and minerals, physical metals and unquoted securities. It also offers an attractive dividend yield to investors.
Our opinion
Managed by one of the most experienced teams in the market, this trust is ideally positioned to tap into a number of global tailwinds set to benefit the mining sector. The trust has significant flexibility to invest across various metals and mining companies, including unquoted companies. The trust also offers an alternative – and attractive – source of income to investors. The result is a conviction-led approach to investing in the mining sector, as opposed to focusing on the short-term direction of commodity prices.Trust manager
A part of the US-based BlackRock Group, BlackRock manages assets across equity, fixed income, cash management, alternative investment and real estate strategies. It provides this comprehensive range of products across numerous continents with more than 130 investment teams in 30 countries.
The trust is co-managed by Evy Hambro and Olivia Markham. Evy is the global head of thematic and sector based investing and team leader for the natural resources team within the fundamental equity division of BlackRock's active equity group. He is responsible for the platform of thematic products, including the BlackRock Gold and General fund. Evy’s service with the firm dates back to 1994, including his years with Mercury Asset Management and Merrill Lynch Investment Managers (MLIM) which merged with BlackRock in 2006.
Olivia is also a member of the Natural Resources Equity team, where she is responsible for coverage of the gold and mining sectors. Olivia joined BlackRock in 2011, having previously been head of the European mining team at UBS. Before moving to London in 2009, Olivia worked for Merrill Lynch in Sydney covering the Australian miners.
Evy HambroTrust manager
Investment board
The five-strong board is chaired by David Cheyne. David is also a senior adviser to Akira Partners LLP and a trustee of the RAF Benevolent Fund and Stowe School Foundation. In his past career he held the position of Vice Chairman-Europe., Middle East & Africa at Moelis & Co. and Senior Partner at global law firm Linklaters LLP. In his time at Linklaters, David was responsible for a number of M&A deals, joint ventures, flotations and general corporate finance work. He also advised on a number of mining transactions.
The remaining board members are Srinivasan Venkatakrishnan, Jane Lewis and Judith Mosely and Charles (Chip) Goodyear.
Investment process
The investment process begins with a screen to evaluate the financial health, liquidity and governance of a company. This is then followed by both bottom-up and top-down research. The bottom-up research includes company meetings, financial modelling, site visits (the team regularly visit companies across the globe) and evaluation of the ESG (Environmental, Social and Governance) aspects of any potential investment.
The top-down research includes commodity and industry analysis as well as an evaluation of macro trends. This then feeds into portfolio construction – with the team focusing on diversification, relative valuations and active risk.
One of the key benefits of the trust is its flexibility – the team can use the advantages of the closed-ended structure to enhance returns for shareholders, while the managers are also able to invest in more nimble mining companies, with flexibility to shift allocations between commodities depending on their view at the time.
The trust can hold up to 10 percent of gross assets in physical metals and up to 20 percent may be invested in unquoted investments.
The trust also pays a dividend to investors. Whilst mainly invested in equities, the company makes use of fixed income and unquoted investment to enhance revenue. The global remits means the majority of its holdings generate earnings from around the world.
ESG
ESG - Integrated
Sustainable investing spans a range of strategies at BlackRock. The firm has some 40 professionals in eight offices around the world to oversee ESG integration with investment approaches. ESG plays an important role in the natural resources space, as miners need to demonstrate their ESG credentials to maintain a social license to operate. The team also believes embedding ESG considerations provides better risk-adjusted returns, while an ESG focus in the investment process can also help avoid “blow-up” incidents.
As a result, analysts and portfolio managers comment on ESG when completing research templates, with it being discussed in detail when meeting company management. ESG is embedded in all four stages of the process – starting with the idea generation stage where the team evaluates the investable universe; the due diligence stage takes into account any ESG issues – this includes using the firm’s ESG risk ‘Window’, which looks at a series of underlying metrics and evaluates the impact they will have on an investment. ESG conclusions are then carried forward into the decision making undertaken at the portfolio construction stage, while the continuous evaluation of companies includes a quarterly portfolio review of MSCI ESG scores and a quarterly Ethix portfolio screen.
Risk
Mining shares typically experience above average volatility when compared to other investments. Trends which occur within the general equity market may not be mirrored within mining securities. The trust also invests in emerging markets, which are usually associated with greater risk than their peers in the developed world.
Overseas investment will be affected by movements in currency exchange rates, while there is also some exposure to smaller companies in the portfolio.
Gearing
The board reviews the level of gearing on a regular basis with the maximum level set at 25 per cent (currently 12.4 per cent at 9 September 2022).
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